China and India Challenge Pharmaceutical Giants to Improve their Healthcare Systems

China’s current five-year plan, setting policy for 2011-2015, was crafted with the goal of boosting research and development, especially in the biomedical sector, and reducing social inequality. The Chinese government is implementing a series of healthcare reforms, such as extending basic medical insurance coverage to cover 90% of the urban and rural population, and establishing an essential drug supply system to develop a unified distribution network. The plan to build 29,000 township hospitals, resulting in one hospital for each county, is to be met by the free training of general practitioners (GPs) and the recruitment of new doctors for rural areas.

India’s recent healthcare policies reflect China’s aim of caring for the country’s increasing population, by allowing billions of people to gain access to healthcare for the first time. In early March 2012, Prime Minister Manmohan Singh, who once described the country’s healthcare system as a “national shame,” announced plans for a massive increase in spending on healthcare. India now lags behind other developing countries in terms of healthcare outcomes, with a shockingly high rate of infant mortality and a 40% rate of child malnourishment. If the country is to build upon its recent economic gains, it must improve its healthcare system. India, similar to China, plans to invest in medical staff training, with a goal of opening 600 medical schools and 1,500 nursing colleges to train over one million doctors and 2.5 million nurses in an effort to lessen the country’s shortage of caregivers.

China and India have populations numbering billions, yet pharmaceutical pricing pressures are set to increase, and may foil the efforts of global companies to profit greatly from this potential moneymaker. The regulation of drug pricing represents a growing trend, with India granting its first compulsory license in March 2012, allowing local generics manufacturers to produce a generic version of Bayer’s patented cancer drug, Nexavar, in spite of intellectual property protections. Although China has not yet granted any compulsory licenses, it has announced an intention to do so in the future.

The reassurance of compulsory licensing presents a material risk to pharmaceutical drug sales, with Roche already taking preemptive steps to introduce less expensive versions of specific drugs in an attempt to control the abuse of their patents. GlobalData’s senior analyst for healthcare industry dynamics, Michael Leibfried, stated that, “the oncology giant has announced it will introduce cheaper, differently branded versions of certain drugs in India--preempting the issuance of compulsory licenses and could serve as a deterrent against the exportation of these drugs to markets that are more lucrative.”

Only the future will reveal whether these emerging countries will allow intellectual property to be upheld, or whether their goal for cost-effective public healthcare will challenge more laws and stymie corporate investment.

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